NOTE: The below originally appeared as the editorial in our August 14 One Minute Week newsletter. To find out more, and sign up for free, please click here.
Few markets are priced as efficiently as houses. If you see a beautiful cottage that costs 50% less than other similar properties you can almost guarantee that it will be next to a pig farm or a busy road. The only time that a penthouse apartment overlooking Central Park is sold at a discount is when a murder has been committed there.
This level of efficiency is astonishing for such an antiquated market.
The process of buying and selling a house has not changed that much in the last 100 years. Vellum has been replaced by electronic documents and the internet has helped advertise properties (although nearly all sellers still have boards outside). But fundamentally, a 1920s realtor could still practice today.
In theory, the internet should have changed all this. Hundreds of websites have launched that allow owners to sell direct and keep commissions. But this has not happened. The US National Association of Realtors says that in 1987 a record 20% of sales were by owners acting without agents. Last year it was just 9%.
This makes sense. Anyone who has sold a house knows what a stressful transaction it can be and advertising is not the hard part.
This same is true when selling aircraft. Some people say that the internet will kill off aircraft brokers, but they are missing the point.
Deposits, pre-buy inspections, export certificates, lien checking and the like are far, far more complicated than the process of selling a house (although both should probably use title insurance). The role of an aircraft broker is to make complicated transactions happen.
Some 91% of people selling a house realise that realtors add value. Everyone buying or selling a yet should use an aircraft brokers.